Is Post Office Banking in the Cards?

January 4, 2012

The U.S. Postal Service has long struggled to stay afloat for more than a generation, and the situation has only worsened in recent years. Last fall USPS (a self-funded federal government entity) said it may be forced to close local post offices and pare delivery options to rid its balance sheet of red ink.

But what if instead USPS were to make a pitch for banking America's unbanked and underbanked populations?

Reid Cramer, Director of asset building programs at the New America Foundation, addressed this in a recent blog post on the Foundation's website.

"Banking is hardly a stretch from [USPS's] existing capabilities as they handle cash, track accounts and service customers as a matter of course," Cramer wrote in a post titled Postal Banking to the Rescue of the U.S. Postal Serice. "What's more they have a large reserve of public trust and would be filling a niche that the banks don't want to service,which is providing simple, low-cost savings accounts."

It's not a novel idea. Anyone who has studied banking or travelled outside the U.S. has probably encountered references to Postal Giros, which were used for consumer bill payments prior to the development of automated clearing houses (ACHs) and other consumer electronic payment mechanisms.

Postal banks would have limited powers, focusing exclusively on small-dollar payments and savings accounts. "We'll keep the USPS safely away from mortgages and any kind of consumer lending," he wrote.

Cramer is not alone in suggesting a USPS role in providing access to financial services among the unbanked and underserved. The notion of a USPS Bank has been raised in numerous public forums since fall when the latest round of dire predictions for the future of USPS began to surface.

Even USPS has been toying with the idea. It took a tentative step toward financial services in September when local post offices began selling prepaid gift cards, and there's talk of rolling out an electronic version of Postal Money Orders.

It would probably take an act of Congress and a lot of retooling before USPS could take such a move. But it's worth looking at. Check out Cramer's ideas at the New America Foundation' Asset Building Programs blog. It contains links to related materials.

More than 800 million adults with bank accounts live on less than $5 a day

_{-Financial Access Initiative}